The Reserve Bank of India, which had taken over the bank, ought to have spotted the discrepancies two years back itself while carrying out the annual inspection of GTBs balance sheet. After all, this is an independent process.
Simply put, there have been early signals but it appears that there was no timely action on the part of the central bank. In fact, the GTB issue points towards a failure of the management and audit committee. In other words, despite the presence of audit committee, it appears that the reporting systems had failed.
Now that this known, the proposal to merge GTB with the Oriental Bank of Commerce clearly is a forced merger. It does not make sense to do a due diligence after having announced an intention to merge! This is going to be 10-15 times more complicated than the earlier Nedungadi-PNB merger.
At the outset, this is going to be a very tricky affair as both the banks have completely different technology platforms. Added to that, such moves to bailout sick private sector banks only undermines the valuation of public sector banks, which themselves are public.
The author is former CMD, Punjab National Bank